RBA Lifts Cash Rate to 4.85% in a Fifth 2026 Hike, but Three Members Vote to Hold

The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.85 percent on Tuesday, its fifth increase of 2026.

The decision was announced on Tuesday, November 3 in Sydney, which was still Monday night in the United States. The cash rate target is the benchmark rate that steers borrowing costs across the economy.

The vote was not unanimous. Six members of the Monetary Policy Board voted for the increase. Three voted to leave the target unchanged at 4.60 percent.

That split marks a change from September. TickerGrove reported then that the board's fourth hike of the year, to 4.60 percent, was unanimous. The case for moving again is now contested inside the board itself.

An expected hike, delivered

Markets had the move priced in. Reuters reported before the decision that the bank was expected to raise the rate by 25 basis points to 4.85 percent. That would be the highest level since December 2008, the wire said.

The same report put total tightening this year at 125 basis points across five increases. The Australian dollar was little changed at $0.7002 ahead of the decision. That figure predates the announcement and is not a reaction to it.

Why the board moved again

Inflation remains elevated, and recent data show it is broadly based, the board said. The updated staff forecasts also revised the inflation outlook materially higher. Both points sit at the top of the decision statement.

Fuel and other commodity prices are part of the story, lifted by the conflict in the Middle East. Domestic capacity pressure is another. The board judged it a little tighter than earlier thought.

Technology prices add a newer pressure. Artificial intelligence investment is driving rapid growth in prices for technology-related goods, the board said. Many firms are passing cost pressures on, or looking to do so.

The board also flagged expectations. Inflation staying high for longer raises the risk that higher inflation expectations become embedded. Some measures of expectations have risen lately, it said.

Inflation stays above target far longer

Headline inflation was 3.9 percent over the year to the September quarter. Trimmed mean inflation was 3.7 percent. The trimmed mean strips out the largest price moves to show the underlying trend.

Neither measure is close to target yet. Inflation is expected to remain above 3 percent for the coming year. Headline and underlying inflation stay above 3 percent until the end of 2027.

The return to the 2 to 3 percent target range now takes much longer. Inflation is not expected to reach the top of the range until late 2027. That is around three quarters later than previously forecast.

The middle of the range takes longer still. The Statement on Monetary Policy puts the midpoint arriving in mid-2028. Its detailed forecasts have trimmed mean inflation at 2.9 percent in December 2027 and 2.5 percent in June 2028.

The cost lands on jobs and housing

The hikes since the start of the year have tightened financial conditions, the board said. The economy is slowing, housing prices have fallen significantly, and the unemployment rate has risen.

Unemployment averaged 4.6 percent in the September quarter, rising more than expected. The detailed forecasts put it at 4.9 percent in December 2027. It is projected to reach a bit over 5 percent at the end of 2028, at 5.1 percent.

Housing is carrying much of the adjustment. Prices in September were almost 5 percent below their March peak. Higher rates and falling prices are expected to weigh on dwelling investment and household consumption.

Output growth slows further over the coming year in the forecasts. Gross domestic product grows 1.3 percent through December 2027. Business investment is a partial offset, helped near term by data center construction.

What remains unknown

What remains unknown starts with the split itself. The statement does not name the three members who voted to hold. It also does not say what would change their minds.

Governor Michele Bullock's press conference, set for an hour after the decision, had not happened when this article was written. Her reading of the split and the outlook is still to come.

Whether December brings a sixth increase is also open. The board said it will be attentive to the data. It gave no commitment in either direction.

What to watch next

What to watch next starts with the press conference and the language around the three dissenting votes. Any signal on December will move the debate from the statement to the data.

Then watch the next inflation readings against the new path. Trimmed mean inflation at 2.9 percent by December 2027 is the forecast to test. A slower decline would reopen the case for more tightening.

Jobs and housing complete the test. Unemployment rising toward 5 percent while inflation stays above 3 percent is the board's central case. A faster move in either direction would change it.